The ECB's cautious monetary policy seems hard to argue with. As the markets continue to digest the growing reality of further intervention from the European Central Cank after Friday's feeble inflation reading, the euro has still managed to continue to make further inroads against it's major currency counterparts.

Currency Pair% Change (Month)Difference on £200,000
Eurozone economic recovery

The Consumer Price Index (CPI) data came out at just 1.2%, well under the ECB's target of 2%. Although very much expected, the weak release further highlights the clear need for intervention particularly in the current climate.

This morning's key manufacturing and employment data from the bloc looks set to get the Euro off the mark this week. The most likely market mover could well come tomorrow in the form of Germany's retail sales figures.

With the growing concerns of trade frictions with the US, China and the UK, business sentiment from Europe's powerhouse has fallen flat. Germany remains very much in the spotlight for investors so any deviation here could bring volatility to euro exchange rates in the early stages of this week.

Mercosur agreement to fuel further euro-scepticism

After nearly 2 decades of negotiations, the European Commission finally reached a new trade agreement with the Mercosur in a bid to protect and maintain a trading relationship worth upwards of 88 Billion euros per year.

At first glance, the completion of talks stands out as a great coup for both sides, particularly in a time of great global uncertainty and economic frailty. Indeed, with inflation and growth figures stalling across the bloc and the current debt crisis in Italy, the injection of a wider reach into the monstrous south American markets could prove pivotal in driving investor confidence back into the euro.

The terms of the deal however could prove menacing to European unity however. By freeing up more access to Europe's beef market with preferential tariffs, the concern is European producers will begin to struggle to compete in their own domestic markets.

Given the recent uprising of strong euro-sceptic parties across the bloc within the last 3 years, with most of their strength clearly coming from the more rural, agricultural regions of Europe's powerhouse nations, you could argue this agreement will only intensify tensions and provide further fuel to an anti-establishment uprising. We saw how unnerving the recent elections in Italy proved to be on euro exchange rates, time will tell if this sparks further controversy.

Together, Brazil and Argentina will be bringing a cattle count of 283 million to the table with forecasts for a price drop of up to 16% expected, with the Irish Farmers Association suggesting a loss of 750 million euros in revenue to Irish farmers alone.

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